Indian economy growing way faster than others, but here’s the catch

Why is the gap between gross domestic product growth and industrial production growth so high in India?


Graphic: Ajay Negi/Mint
Graphic: Ajay Negi/Mint

India’s gross domestic product (GDP) growth rate for the January-March quarter came in at 7.9%. As the chart shows, this rate of growth is far above that of comparable economies in any part of the world. The Philippines ranks a distant second, with China third in the GDP growth league tables for the January-March quarter.

While the GDP growth numbers suggest a robust recovery, the industrial production numbers rain a bit on the parade. It has often been said that GDP measures value addition while industrial production measures volume. But that is presumably true for all economies. Why then, as the chart shows, is the gap between GDP growth and industrial production growth so high in India? And why is the difference not so stark in other countries? Is it because of flaws in the computation of our GDP numbers or is it the result of the poor quality of industrial production data? The Central Statistics Office would do well to clarify these matters so that we can celebrate the GDP numbers without niggling doubts about them.

READ MORE